Interim Results - Part 2

Reed International PLC Elsevier NV 9 August 2000 Part 2 COMBINED FINANCIAL INFORMATION Combined profit and loss account FOR THE SIX MONTHS ENDED 30 JUNE 2000 Year ended Six months Six months 31 December ended 30 June ended 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m Turnover 3,464 5,265 Including share of turnover 1,824 1,746 2,973 2,599 of joint ventures (74) (112)Less: share of turnover of (29) (50) (47) (75) joint ventures 3,390 5,153 1,795 1,696 2,926 2,524 3,390 5,153 Continuing operations 1,757 1,696 2,864 2,524 before acquisitions - - Acquisitions 38 - 62 - (1,185) (1,801)Cost of sales (654) (583) (1,066) (866) 2,205 3,352 Gross profit 1,141 1,113 1,860 1,658 (2,028) (3,083)Operating expenses (980) (932) (1,597) (1,389) (1,420) (2,159)Before amortisation (756) (708) (1,232) (1,055) and exceptional items (369) (561)Amortisation of goodwill (191) (179) (311) (267) and intangible assets (239) (363)Exceptional items (33) (45) (54) (67) 177 269 Operating profit 161 181 263 269 (before joint ventures) 177 269 Continuing operations 167 181 273 269 before acquisitions - - Acquisitions (6) - (10) - 3 5 Share of operating profit 8 1 12 1 of joint ventures 180 274 Operating profit including 169 182 275 270 joint ventures Non operating exceptional items 7 11 Continuing - net profit on sale 66 - 108 - of fixed asset investments and businesses 187 285 Profit on ordinary activities 235 182 383 270 before interest (82) (125)Net interest expense (43) (37) (70) (55) 105 160 Profit on ordinary 192 145 313 215 activities before taxation (167) (254)Tax on profit on (90) (77) (146) (114) ordinary activities (62) (94)Profit/(loss) on ordinary 102 68 167 101 activities after taxation (1) (1)Minority interests and - - - - preference dividends (63) (95)Profit/(loss) attributable to 102 68 167 101 parent companies' shareholders (234) (356)Ordinary dividends paid (68) (107) (111) (159) and proposed (297) (451)Retained profit/(loss) 34 (39) 56 (58) taken to combined reserves ADJUSTED FIGURES Year ended Six months Six months 31 December ended 30 June ended 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m 792 1,204 Adjusted operating profit 394 408 642 607 710 1,079 Adjusted profit before tax 351 371 572 552 527 801 Adjusted profit attributable to 260 276 424 411 parent companies' shareholders Adjusted figures, which exclude the amortisation of goodwill and intangible assets, exceptional items and related tax effects, are presented as additional performance measures. Combined cash flow statement FOR THE SIX MONTHS ENDED 30 JUNE 2000 Year ended Six months Six months 31 December ended 30 June ended 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m 898 1,365 Net cash inflow from operating 347 309 566 460 activities before exceptional items (138) (210)Payments relating to exceptional (53) (67) (87) (99) items charged to operating profit 760 1,155 Net cash inflow from operating 294 242 479 361 activities 4 6 Dividends received from joint 5 2 8 3 ventures 33 50 Interest received 13 20 21 30 (114) (173)Interest paid (62) (52) (101) (78) (81) (123)Returns on investments and (49) (32) (80) (48) servicing of finance (173) (262)Taxation before exceptional items(45) (57) (73) (85) 74 112 Exceptional items 5 62 8 92 (99) (150)Taxation (40) 5 (65) 7 (137) (208)Purchase of tangible fixed assets(52) (71) (85) (106) 15 23 Proceeds from sale of fixed 6 4 10 6 assets (122) (185)Capital expenditure (46) (67) (75) (100) (166) (252)Acquisitions (462) (97) (753) (145) (1) (2)Payments against acquisition - - - - provisions 3 5 Exceptional net proceeds from 116 - 189 - sale of fixed asset investments and businesses (164) (249)Acquisitions and disposals (346) (97) (564) (145) (339) (515)Equity dividends paid to (123) (236) (200) (352) shareholders of the parent companies (41) (61)Cash outflow before changes in (305) (183) (497) (274) short term investments and financing 297 451 Decrease in short term 180 143 293 213 investments (197) (300)Financing 138 49 225 74 59 90 Increase in cash 13 9 21 13 Short term investments include deposits of under one year if the maturity or notice period exceeds 24 hours, commercial paper investments and interest bearing securities that can be realised without significant loss at short notice. ADJUSTED FIGURES Year ended Six months Six months 31 December ended 30 June ended 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m 780 1,186 Adjusted operating cash flow 306 244 499 363 98% 98% Adjusted operating cash flow 78% 60% 78% 60% conversion Reed Elsevier businesses focus on adjusted operating cash flow as the key cash flow measure. Adjusted operating cash flow is measured after dividends from joint ventures, tangible fixed asset spend and proceeds from the sale of fixed assets but before exceptional payments and proceeds. Adjusted operating cash flow conversion expresses adjusted operating cash flow as a percentage of adjusted operating profit. Combined statement of total recognised gains and losses FOR THE SIX MONTHS ENDED 30 JUNE 2000 Year ended Six months Six months 31 December ended 30 June ended 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m (63) (95) Profit/(loss)attributable 102 68 167 101 to parent companies' shareholders 17 405 Exchange translation 77 65 64 310 differences (46) 310 Total recognised gains and 179 133 231 411 losses for the period Combined shareholders' funds reconciliation FOR THE SIX MONTHS ENDED 30 JUNE 2000 Year ended Six months Six months 31 December ended 30 June ended 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m (63) (95) Profit/(loss) 102 68 167 101 attributable to parent companies' shareholders (234) (356) Ordinary dividends paid (68) (107) (111) (159) and proposed 5 8 Issue of shares on exercise 4 (1) 6 (1) of options, less capital redemptions 17 405 Exchange translation 77 65 64 310 differences (275) (38) Net increase/(decrease) 115 25 126 251 in shareholders' funds 2,130 3,025 Combined shareholders' 1,855 2,130 2,987 3,025 funds at the beginning of the period 1,855 2,987 Combined shareholders' 1,970 2,155 3,113 3,276 funds at the end of the period Combined balance sheet AS AT 30 JUNE 2000 As at 31 December As at 30 June As at 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m 3,400 5,474 Goodwill and intangible 3,873 3,641 6,119 5,534 assets 505 814 Tangible assets and 497 528 786 803 investments 3,905 6,288 Fixed assets 4,370 4,169 6,905 6,337 113 183 Stocks 120 112 190 170 666 1,072 Debtors - amounts falling 713 650 1,126 988 due within one year 148 238 Debtors - amounts falling 171 143 270 217 due after more than one year 440 708 Cash and short term 278 567 440 862 investments 1,367 2,201 Current assets 1,282 1,472 2,026 2,237 (2,676)(4,308) Creditors: amounts falling (2,700) (2,777) (4,266)(4,221) due within one year (1,309)(2,107) Net current liabilities (1,418) (1,305) (2,240)(1,984) 2,596 4,181 Total assets less current 2,952 2,864 4,665 4,353 liabilities (620) (998) Creditors: amounts falling (867) (680) (1,370)(1,034) due after more than one year (113) (182) Provisions for liabilities (105) (22) (166) (33) and charges (8) (14) Minority interests (10) (7) (16) (10) 1,855 2,987 Net assets 1,970 2,155 3,113 3,276 1,066 1,717 Net borrowings 1,481 1,247 2,340 1,895 Approved by the Boards of Reed International P.L.C. and Elsevier NV, 8 August 2000. NOTES TO THE COMBINED FINANCIAL INFORMATION 1 BASIS OF PREPARATION The Reed Elsevier combined financial information ('the combined financial information') represents the combined interests of Reed International and Elsevier shareholders and encompasses the businesses of Reed Elsevier plc and Elsevier Reed Finance BV and their respective subsidiaries, associates and joint ventures, together with the parent companies, Reed International and Elsevier ('the combined businesses'). The combined financial information, which has been prepared on the basis of the accounting policies set out in the Reed Elsevier Annual Reports & Financial Statements 1999, is unaudited but has been reviewed by the auditors and their report to the Boards of Reed International and Elsevier is set out below. 2 EXCHANGE TRANSLATION RATES In preparing the combined financial information the following exchange rates have been applied: Year ended 31 December 1999 Profit and loss Balance sheet Profit Balance 30 June 30 June 30 June 30 June and loss sheet 2000 1999 2000 1999 1.52 1.61 Euro to sterling 1.63 1.49 1.58 1.52 1.62 1.62 US dollars to sterling 1.57 1.62 1.52 1.57 0.94 0.99 Euro to US dollars 1.04 0.92 1.04 0.97 3 SEGMENT ANALYSIS TURNOVER Year ended Six months Six months 31 December ended 30 June ended 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m Business segment 652 991 Scientific 345 318 562 473 1,268 1,927 Legal 647 609 1,055 906 1,470 2,235 Business 803 769 1,309 1,145 3,390 5,153 Total 1,795 1,696 2,926 2,524 Geographical origin 1,836 2,791 North America 995 927 1,622 1,379 698 1,061 United Kingdom 359 340 585 506 391 594 The Netherlands 196 203 319 302 307 467 Rest of Europe 162 155 264 231 158 240 Rest of World 83 71 136 106 3,390 5,153 Total 1,795 1,696 2,926 2,524 Geographical market 1,906 2,898 North America 1,021 951 1,664 1,415 484 736 United Kingdom 268 241 437 359 237 360 The Netherlands 114 113 186 168 418 635 Rest of Europe 209 217 341 323 345 524 Rest of World 183 174 298 259 3,390 5,153 Total 1,795 1,696 2,926 2,524 ADJUSTED OPERATING PROFIT -(EXCLUDING EXCEPTIONAL ITEMS AND AMORTISATION) Year ended Six months Six months 31 December ended 30 June ended 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m Business segment 231 351 Scientific 124 120 202 179 316 480 Legal 120 146 196 217 245 373 Business 150 142 244 211 792 1,204 Total 394 408 642 607 Geographical origin 359 547 North America 165 182 269 271 191 290 United Kingdom 94 99 153 147 135 205 The Netherlands 66 70 108 104 87 132 Rest of Europe 53 50 86 75 20 30 Rest of World 16 7 26 10 792 1,204 Total 394 408 642 607 OPERATING PROFIT (INCLUDING EXCEPTIONAL ITEMS AND AMORTISAION) Year ended Six months Six months 31 December ended 30 June ended 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m Business segment 111 169 Scientific 78 73 127 109 77 117 Legal 15 47 24 70 (8) (12)Business 76 62 124 91 180 274 Total 169 182 275 270 Geographical origin (52) (79)North America (2) 11 (3) 16 86 131 United Kingdom 57 67 93 100 91 138 The Netherlands 64 64 104 95 51 78 Rest of Europe 39 37 64 55 4 6 Rest of World 11 3 17 4 180 274 Total 169 182 275 270 4 EXCEPTIONAL ITEMS Year ended Six months Six months 31 December ended 30 June ended 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m (161) (244)Reorganisation costs (27) - (44) - (28) (43)Acquisition related (6) (10) (10) (15) integration costs (50) (76)Year 2000 compliance - (35) - (52) costs (239) (363)Charged to operating (33) (45) (54) (67) profit 7 11 Net profit on sale of 66 - 108 - fixed asset investments and businesses (232) (352)Total exceptional 33 (45) 54 (67) credit/(charge) 15 23 Net tax credit 1 18 2 27 5 COMBINED CASH FLOW STATEMENT Reconciliation of operating profit to net cash inflow from operating activities Year ended Six months Six months 31 December ended 30 June ended 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m 177 269 Operating profit 161 181 263 269 (before joint ventures) 239 363 Exceptional charges to 33 45 54 67 operating profit 416 632 Operating profit before 194 226 317 336 exceptional items 369 561 Amortisation of 191 179 311 267 goodwill and intangible assets 117 178 Depreciation 55 55 90 82 (3) (5)Net SSAP24 pension - (2) - (3) credit 483 734 Total non cash items 246 232 401 346 (1) (1)Movement in working (93) (149) (152) (222) capital 898 1,365 Net cash inflow from 347 309 566 460 operating activities before exceptional items (138) (210)Payments relating to (53) (67) (87) (99) exceptional items charged to operating profit 760 1,155 Net cash inflow from 294 242 479 361 operating activities Reconciliation of net borrowings Year ended 31 Six months December Short term ended 30 June 1999 Cash investments Borrowings 2000 1999 £m £m £m £m £m £m (962) Net borrowings at the 79 361 (1,506) (1,066) (962) beginning of the period 59 Increase in cash 13 - - 13 9 (297) Decrease in short - (180) - (180) (143) term investments 202 (Increase)/decrease - - (134) (134) (50) in borrowings (36) Change in net 13 (180) (134) (301) (184) borrowings resulting from cash flows (11) Inception of finance - - - - (5) leases (57) Exchange translation 2 3 (119) (114) (96) differences (1,066) Net borrowings at the 94 184 (1,759) (1,481) (1,247) end of the period Year ended 31 Six months December Short term ended 30 June 1999 Cash investments Borrowings 2000 1999 Euro m Euro m Euro m Euro m Euro m Euro m (1,366) Net borrowings at the 127 581 (2,425) (1,717) (1,366) beginning of the period 90 Increase in cash 21 - - 21 13 (451) Decrease in short - (293) - (293) (213) term investments 308 (Increase)/decrease - - (219) (219) (75) in borrowings (53) Change in net 21 (293) (219) (491) (275) borrowings resulting from cash flows (17) Inception of finance - - - - (7) leases (281) Exchange translation 1 3 (136) (132) (247) differences (1,717) Net borrowings at the 149 291 (2,780) (2,340) (1,895) end of the period 6 ADJUSTED FIGURES Adjusted profit and cash flow figures are used by the Reed Elsevier businesses as additional performance measures. The adjusted figures are derived as follows: Year ended Six months Six months 31 December ended 30 June ended 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m 180 274 Operating profit 169 182 275 270 including joint ventures Adjustments: 373 567 Amortisation of 192 181 313 270 goodwill and intangible assets 161 244 Reorganisation costs 27 - 44 - 28 43 Acquisition related 6 10 10 15 integration costs 50 76 Year 2000 compliance - 35 - 52 costs 792 1,204 Adjusted operating 394 408 642 607 profit 105 160 Profit before tax 192 145 313 215 Adjustments: 373 567 Amortisation of 192 181 313 270 goodwill and intangible assets 161 244 Reorganisation costs 27 - 44 - 28 43 Acquisition related 6 10 10 15 integration costs 50 76 Year 2000 compliance - 35 - 52 costs (7) (11)Net profit on sale of (66) - (108) - fixed asset investments 710 1,079 Adjusted profit 351 371 572 552 before tax (63) (95)Profit/(loss) 102 68 167 101 attributable to parent companies' shareholders Adjustments: 373 567 Amortisation of 192 181 313 270 goodwill and intangible assets 161 244 Reorganisation costs 25 - 41 - 22 33 Acquisition related 4 10 7 15 integration costs 41 63 Year 2000 compliance - 17 - 25 costs (7) (11)Net profit on sale of (63) - (104) - fixed asset investments 527 801 Adjusted profit 260 276 424 411 attributable to parent companies' shareholders 760 1,155 Net cash inflow from 294 242 479 361 operating activities 4 6 Dividends received from 5 2 8 3 joint ventures (137) (208)Purchase of tangible (52) (71) (85) (106) fixed assets 15 23 Proceeds from sale of 6 4 10 6 fixed assets 138 210 Payments in relation to 53 67 87 99 exceptional items charged to operating profit 780 1,186 Adjusted operating 306 244 499 363 cash flow 7 POST BALANCE SHEET EVENT On 25 July 2000, Reed Elsevier entered into a definitive agreement to acquire the businesses comprising Miller Freeman Europe for £360m/Euro585m. The businesses will be integrated principally within Reed Exhibition Companies. REED INTERNATIONAL P.L.C SUMMARY FINANCIAL INFORMATION Consolidated profit and loss account Year ended 31 December Six months ended 30 June 1999 2000 1999 £m £m £m 1,793 Share of turnover of joint ventures 950 897 (1) Operating loss (before joint ventures) Share of operating profit of joint ventures: 414 Before amortisation and exceptional items 207 213 (323) Amortisation and exceptional items (119) (120) 90 Operating profit including joint ventures 88 93 4 Share of non operating exceptional items 35 - of joint ventures (43) Net interest (23) (20) (including share of joint ventures) 51 Profit on ordinary activities before 100 73 taxation (90) Tax on profit on ordinary activities (48) (40) 5 UK corporation tax (2) - (95) Share of tax of joint ventures (46) (40) (39) Profit/(loss) attributable to ordinary 52 33 shareholders (116) Dividends paid and proposed (34) (53) (155) Retained profit/(loss) taken to reserves 18 (20) (3.4)p Basic earnings/(loss) per share 4.5p 2.9p (3.4)p Diluted earnings/(loss) per share 4.5p 2.9p 24.4 p Adjusted earnings per share 12.0p 12.8p Adjusted earnings per share is based upon the Reed International shareholders' 52.9% economic interest in the adjusted profit attributable of the Reed Elsevier combined businesses. Dividends The directors of Reed International have declared an interim dividend of 3.1p (1999 interim: 4.6p). In 1999 the full year dividend was 10.0p. Cash flows The cash flows of Reed International primarily comprise dividends received from Reed Elsevier plc and dividends paid to Reed International shareholders. Consolidated balance sheet As at 31 December As at 30 June 1999 2000 1999 £m £m £m 857 Fixed asset investment in joint ventures 888 1,015 Current assets 233 Debtors 235 229 (73) Creditors: amounts falling due within one year (45) (68) 160 Net current assets 190 161 1,017 Total assets less current liabilities 1,078 1,176 (36) Creditors: amounts falling due after (36) (36) more than one year 981 Shareholders' funds 1,042 1,140 Approved by the Board of Directors, 8 August 2000. Basis of preparation The Reed International share of the Reed Elsevier combined results has been calculated on the basis of the 52.9% economic interest of the Reed International shareholders in the Reed Elsevier combined businesses, after taking account of results arising in Reed International and its subsidiary undertakings. Reed International's 52.9% economic interest in the net assets of the combined businesses has been shown in the balance sheet as interests in joint ventures, net of the assets and liabilities reported as part of Reed International and its subsidiary undertakings. The interim figures for the six months ended 30 June 2000 and the comparative amounts to 30 June 1999 are unaudited but have been reviewed by the auditors and their report to the Board of Reed International is set out below. The financial information for the year ended 31 December 1999 has been abridged from the financial statements for that year, which have been filed with the UK Registrar of Companies and received an unqualified audit report. ELSEVIER NV SUMMARY FINANCIAL INFORMATION Profit and loss account Year ended 31 December Six months ended 30 June 1999 2000 1999 Euro m Euro m Euro m 2,577 Share of turnover of joint ventures 1,463 1,262 (5) Operating loss (before joint ventures) (1) (3) Share of operating profit of joint ventures: 608 Before amortisation and exceptional items 323 307 (466) Amortisation and exceptional items (184) (168) 137 Operating profit including joint ventures 138 136 6 Share of non operating exceptional items 54 - of joint ventures (63) Net interest (35) (28) (including share of joint ventures) 80 Profit on ordinary activities before 157 108 taxation (128) Share of tax of joint ventures (73) (57) (48) Profit/(loss) attributable to ordinary 84 51 shareholders (179) Dividends paid and proposed (55) (79) (227) Retained profit/(loss) taken to reserves 29 (28) Euro (0.07) Basic earnings/(loss) per share Euro 0.12 Euro 0.07 Euro (0.07) Diluted earnings/(loss) per share Euro 0.12 Euro 0.07 Euro 0.57 Adjusted earnings per share Euro 0.30 Euro 0.29 Adjusted earnings per share is based upon the Elsevier shareholders' 50% share of the adjusted profit attributable of the Reed Elsevier combined businesses. Dividends The directors of Elsevier have proposed an interim dividend of Euro 0.09 (1999 interim: Euro 0.12). In 1999 the full year dividend was Euro 0.27. Cash flows The cash flows of Elsevier primarily comprise dividends received from Reed Elsevier plc group and dividends paid to Elsevier shareholders. Balance sheet As at 31 December As at 30 June 1999 2000 1999 Euro m Euro m Euro m 1,559 Financial fixed assets 1,583 1,692 61 Accounts receivable 61 64 19 Short term investments 14 16 80 Current assets 75 80 (102) Current liabilities (57) (82) (22) Net working capital 18 (2) (8) Long term liabilities (8) (11) (36) Provisions (36) (36) 1,493 Shareholders' funds 1,557 1,643 Signed by the Boards of Directors, 8 August 2000. Basis of preparation The results for the six months ended 30 June 2000 reflect Elsevier's 50% share of the Reed Elsevier combined businesses, accounted for on an equity basis. The interim figures for the six months ended 30 June 2000 and the comparative amounts to 30 June 1999 are unaudited but have been reviewed by the auditors and their report to the Boards of Elsevier is set out below. The financial information for the year ended 31 December 1999 has been abridged from the statutory accounts of Elsevier for that year and the auditors, Deloitte & Touche, have confirmed that their opinion on those accounts was unqualified. ADDITIONAL INFORMATION FOR US INVESTORS Summary Combined Financial Information in US Dollars Highlights of the Reed Elsevier combined financial information in US dollars are given below. This is a simple translation into US dollars at stated rates of exchange (see note 2 to the combined financial information) and does not represent a restatement under US GAAP. Year ended 31 December Six months ended 30 June Change % 1999 2000 1999 US$m US$m US$m 5,492 Net sales 2,818 2,748 +3 1,283 Adjusted operating profit 619 661 -6 1,150 Adjusted profit before tax 551 601 -8 854 Adjusted profit attributable 408 447 -9 1,263 Adjusted operating cash flow 480 395 +22 $ Adjusted earnings per American $ $ Depositary Share (ADS) 1.58 Reed International (Each ADS 0.75 0.83 -9 comprises four ordinary shares)0.58 0.63 -8 1.22 Elsevier (Each ADS comprises two ordinary shares) As at 31 December As at 30 June 1999 2000 1999 US$m US$m US$m 5,508 Goodwill and intangible assets 5,887 5,716 3,033 Other assets 2,704 3,140 8,541 Total assets 8,591 8,856 2,440 Borrowings 2,674 2,848 3,096 Other liabilities 2,923 2,625 3,005 Combined shareholders' funds 2,994 3,383 8,541 Total liabilities and shareholders' funds 8,591 8,856 Summary of the Principal Differences between UK and Dutch GAAP and US GAAP The combined financial information has been prepared in accordance with UK and Dutch GAAP, which differ in certain significant respects from US GAAP. The principal differences that affect net income and combined shareholders' funds relate to the capitalisation and amortisation of goodwill and other intangibles, pensions and related deferred tax effects. A more complete explanation of the accounting policies used by the Reed Elsevier combined businesses and the differences between UK and Dutch GAAP and US GAAP is set out in the Reed Elsevier Annual Reports & Financial Statements 1999. The effects on net income and combined shareholders' funds of material differences between UK and Dutch GAAP and US GAAP are set out below: Year ended Six months Six months 31 December ended 30 June ended 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m (63) (95) Net income under UK and 102 68 167 101 Dutch GAAP US GAAP adjustments: (83) (126) Amortisation of goodwill (46) (38) (75) (57) and other intangibles 67 101 Deferred taxation 40 20 65 30 6 9 Pensions 7 1 11 2 - - Other items 3 - 5 - (73) (111) Net income under US GAAP 106 51 173 76 As at 31 December As at 30 June As at 30 June 1999 1999 2000 1999 2000 1999 £m Euro m £m £m Euro m Euro m 1,855 2,987 Combined shareholders' 1,970 2,155 3,113 3,276 funds under UK and Dutch GAAP US GAAP adjustments: 553 890 Goodwill and other 581 612 918 930 intangibles (180) (290) Deferred taxation (196) (230) (310) (350) 63 102 Pensions 70 58 111 88 5 8 Other items 10 4 16 6 127 204 Ordinary dividends not 68 107 107 163 declared in the period 2,423 3,901 Combined shareholders' 2,503 2,706 3,955 4,113 funds under US GAAP Independent review report to the Directors of Reed International P.L.C. and to the Members of the Supervisory and Executive Boards of Elsevier NV Introduction On the instruction of the Boards of Reed International P.L.C. and Elsevier NV, we have reviewed the combined financial information of Reed International P.L.C., Elsevier NV, Reed Elsevier plc and Elsevier Reed Finance BV and their respective subsidiaries (together 'the combined businesses') and the financial information of Reed International P.L.C. and Elsevier NV for the six months ended 30 June 2000 set out on pages 9 to 17, and we have read the other information contained in the Reed Elsevier Interim Statement and considered whether it contains any apparent misstatement or material inconsistencies with the financial information. Directors' responsibilities The Reed Elsevier Interim Statement, including the financial information contained therein, is the responsibility of, and has been approved by, the Directors of Reed International P.L.C. and Elsevier NV. The Listings Rules of the UK Financial Services Authority and Generally Accepted Accounting Principles in the UK and the Netherlands require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the UK Auditing Practices Board. A review consists principally of making enquiries of the managements of the Reed Elsevier combined businesses and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2000. Deloitte & Touche Deloitte & Touche Chartered Accountants Accountants London Amsterdam 8 August 2000 8 August 2000 FINANCIAL DIARY FOR 2000 9 August Announcement of Interim Results for the six months to 30 June 2000 14 August Ordinary shares and ADSs in Elsevier NV go ex-dividend for interim dividend 16 August Record date - ADSs in Elsevier NV 21 August Ordinary shares and ADSs in Reed International P.L.C. go ex-dividend for interim dividend 23 August Record date - ADSs in Reed International P.L.C. 25 August Record date - Reed International P.L.C. ordinary shares 18 SeptemberInterim dividends for 2000 paid on Reed International P.L.C. and Elsevier NV ordinary shares 25 SeptemberInterim dividends for 2000 paid on Reed International P.L.C. and Elsevier NV ADSs 7 December Trading Update issued in relation to the 2000 financial year FINANCIAL DIARY FOR 2001 22 February Announcement of Preliminary Results for the year ended 31 December 2000 10 April Reed International P.L.C. Annual General Meeting 11 April Elsevier NV Annual General Meeting 9 August Announcement of Interim Results for the six months to 30 June 2001 AUDITORS Deloitte & Touche Deloitte & Touche Hill House, 1 Little New Street Orlyplein 50 London EC4A 3TR, United Kingdom 1043 DP Amsterdam, The Netherlands I. STOCKBROKERS Cazenove & Co BN AMRO Bank NV 12 Tokenhouse Yard Gustav Mahlerlaan 10 London EC2R 7AN, United Kingdom 1082 PP Amsterdam, The Netherlands I. ADR DEPOSITARY Citibank NA 111 Wall Street, New York, NY 10043, USA Reed International P.L.C. Elsevier NV CUSIP No. 758212872 CUSIP No.290259100 (Trading Symbol: RUK) (Trading Symbol: ENL) STOCK EXCHANGE QUOTATIONS Reed International P.L.C. shares and Elsevier NV shares are quoted on the stock exchanges in Amsterdam, London and New York. In addition, Elsevier shares are quoted on the EBS stock exchange in Switzerland and are also traded in the Freiverkehrsmarkt in Frankfurt. Trading on the New York Stock Exchange is in the form of American Depositary Shares (ADSs), evidenced by American Depositary Receipts (ADRs). Each Elsevier ADS represents two Elsevier shares and each Reed International ADS represents four Reed International shares. Enquiries concerning Reed International or Elsevier ADSs should be addressed to Citibank Shareholder Services, PO Box 2502, Jersey City, NJ 07303 2502 or by telephoning +1 877 248 4237 (toll free if dialled from within the United States). This statement is being mailed to shareholders of Reed International P.L.C. on 9 August 2000 and will be available to the shareholders of Elsevier NV upon request. Copies are available to the public from the registered offices of the respective companies. Reed International P.L.C. Elsevier NV 25 Victoria Street Van de Sande Bakhuyzenstraat 4 London, SW1H 0EX, United Kingdom 1061 AG Amsterdam, The Netherlands Tel: +44 (0) 20 7222 8420 Tel: +31 20 515 9257 Fax: +44 (0) 20 7227 5799 Fax: +31 20 618 0325 For further information or contact details, please consult our website: www.reedelsevier.com

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